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Dictatorships, leftism and legal uncertainty drive away domestic trade in the Americas

There is no shortage of groups, blocs and events that aim to promote the integration of the countries of the Americas: Mercosur, United States-Mexico-Canada Agreement (which replaced NAFTA), Community of Latin American and Caribbean States (Celac), Bolivarian Alliance for the Peoples of Our America (Alba), Union of South American Nations (Unasur), Lima Group, Summit of the Americas, which had its ninth edition held in Los Angeles last week…

It is clear that the composition of these groups varies a lot and also their objectives, which often contradict each other: the Lima Group, for example, aims to contribute to the return of democracy in Venezuela, while the Alba seeks to legitimize and give continuity to the Chavista dictatorship. However, they all have in common the failure to effectively integrate the region.

In an article published last year, Detlef Nolte, associate member of the German Institute for Global and Area Studies (Giga, in acronym in English), former director of the Giga Institute of Latin American Studies and adjunct professor of political science at the University of Hamburg, highlighted that trade between Latin American countries is one of the least integrated in the world.

Between 1990 and 2014, while intraregional trade in all regions of the world accounted for 34% of world trade, in Latin America and the Caribbean it did not exceed the range of %. In 2020, with the impact of the Covid pandemic-, intraregional trade in the region fell 24%, more than the extra-regional. In other words: Latin American countries do (much) more business with countries from other regions of the world than with each other.

The Gazeta do Povo details the main reasons for this lack of integration in the Americas.

Disinterest of the great powers

Former US President Donald Trump (2017-2021), which has always expressed its contempt for multilateralism and its preference for bilateral relations, threatened to withdraw the United States from NAFTA (which led to a renegotiation and the creation of a new agreement with Canada and Mexico) and left the Trans-Pacific Partnership, which brings together countries from the Americas and other continents.

His successor, Joe Biden, preached a rapprochement with neighbors during the Summit of the Americas , but he was criticized for taking too long to take this initiative – his first year and a half in office was monopolized by internal issues, China and the Ukrainian war.

The economist Igor Macedo de Lucena, PhD student in relationships at the University of Lisbon and a member of Chatham House – The Royal Institute of International Affairs and the Portuguese Association of Political Science, pointed out in an interview with Gazeta do Povo that the two greatest powers in Latin America also have no interest in integrating the Americas.

“Brazil was supposed to be the great leader, Germany in Latin America, in the sense of leading an integration project, for our population, our consumer market, but historically the country is tied to the your own process. Since redemocratization, we have focused a lot on ourselves, we hardly look at Latin America. Without an economically strong country driving this integration, it will hardly happen”, he pointed out.

In the case of Mexico, Lucena argued that, because it is “umbilically linked to the old NAFTA and the new agreement with Canada and the United States”, the largest Spanish-speaking country in the world, “looks much more towards this integration within North America than towards Latin America”.

Left-wing dictatorships in the region

In addition to the repression they impose on their populations, Venezuela, Cuba and Nicaragua generate pressure in neighboring countries (such as the millions of Venezuelan refugees and the protection that the regime of Nicolás Maduro offers to guerrillas and traffickers in the Colombian border region) and destabilize political dialogue in the Americas, as they divide the continent between supporters (Argentina, Bolivia) and critics (United States, Colombia, Brazil).

“The growing authoritarian tendencies after Maduro came to power in Venezuela led to an increase in political conflicts in the region, especially after the shift to right-wing governments in many other Latin American countries, including Brazil. But there were also governments that supported Venezuela”, argued Detlef Nolte, in the article published in 2021.

“The political-ideological polarization not only made the development of joint regional projects, but it also jeopardized the survival of existing regional organizations”, he added.

To cite two examples: Brazil left CELAC after Jair Bolsonaro became president due to to the presence of Cuba, Venezuela and Nicaragua in the community, while Argentina abandoned the Lima Group because the Alberto Fernández administration claimed that its members aimed to “isolate the government of Venezuela.”

Igor Macedo de Lucena pointed out that the presence of dictatorships makes integration difficult in the Americas, but its absence also contributes to the perpetuation of authoritarian regimes.

“When we look at other economic integration projects, the Union European pressured Spain and Portugal and this was one of the reasons for transitions to democracy to take place there”, he justified.

“There is no doubt that, if there were a greater integration project, there would be pressure so that these dictatorships do not consolidate or that they walk towards democracy again in these countries”, said the economist.

Legal and economic uncertainty

Igor Macedo de Lucena pointed out that in Latin America, historically, “economic development is never permanent”. “Like Brazil, many countries suffer from the same ailment: development projects that are changed or abandoned as governments pass, there is no continuity”, he pointed out, citing Chile and, more recently, Colombia and Panama as exceptions.

The Heritage Foundation’s most recent economic freedom ranking has only five countries in the Americas among those that enter the free and mostly free categories: Canada (15 th place), Chile (20º), United States (25º), Barbados (34º) and Uruguay (34º).

However, among the countries considered to have little or no economic freedom, there are from the Americas: El Salvador (45º), Guyana (45º), Honduras (99º), Trinidad and Tobago ( 99º), Beli ze (109º), Nicaragua (122º), Dominica (125º), Ecuador (126º), Brazil (133º), Argentina (144º), Haiti (145º), Suriname (156º), Bolivia (169º), Cuba (175º) and Venezuela (176º).

The ranking takes into account several factors, such as the effectiveness of the Judiciary, integrity of government, tax burden and ease of doing business and investment.

China’s growing influence

China has been increasing in recent years its presence in Latin America and decreasing the influence of the United States, due to political factors, such as the connection with the left-wing dictatorships in the region, but mainly for economic reasons, with loans from its state banks and investments.

China recently broke a historic hegemony of Brazil and became Argent’s biggest trading partner ina.

“China’s growing economic presence in Latin America has triggered a reaction from the United States, which is trying to reduce Chinese influence. Among other things, this has led to a politicization of US trade policy in Latin America. Latin America has become yet another arena in the global conflict between China and the United States,” said Detlef Nolte.

With the shadow of the world’s second largest economy and an unsatisfactory track record , an integration of the Americas is increasingly distant from leaving speeches and reaching practice.

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